Friday, May 2, 2008

It's good to know that there are folks at Chrysler who are still having a good time despite the rubbish state of auto sales in the U.S. The best evidence of this is the automakers's entry this year's One Lap of America "cross-country" race. Chrysler's Vice President Ralph Gilles and Erich Heuschele, Vehicle Dynamics Supervisor for SRT, are entering a blank white Challenger inspired by the 1970 Dodge Challenger that stars in the cult film Vanishing Point from 1971. The plot of the original movie revolves around a guy named Kowalski who has to deliver a white 1970 Challenger from Denver to San Francisco. He's aided by a blind DJ named Super Soul who listens to the police band and delivers helpful if not clairvoyant info to the protagonist over the radio. It's fitting then that Gilles and Heuschele have entered the One Lap race this year under the names of Kowalski and Super Soul, and the car they'll be driving is the very first preproduction Challenger prototype that was ever driven on public roads. It's been rescued from the crusher and slightly modified with a fresh coat of white paint (the first ever seen on a new Challenger) and new wheels to more resemble the original. Check out our gallery of the "Return to Vanishing Point" Challenger below, and glimpse the fun film Chrysler produced after the jump.

Carmaker’s top leaders say it will be smaller, partner with others, and have higher quality products

Eric Morath / The Detroit News

Chrysler LLC's top executives have a vision for the automaker that in some ways defies much of what has defined being one of Detroit's Big Three.

Their Chrysler will be smaller. It will forge more alliances with other automakers and parts suppliers to gain access to new technology and to make better use of its manufacturing capacity. It will build fewer, but better, cars and trucks that meet changing consumer demands. And it will be profitable.

"Just tonnage is not the measurement anymore," Chrysler CEO Bob Nardelli said Thursday in a wide-ranging interview with The Detroit News that included Jim Press and Tom LaSorda, who share the title of vice chairman and president. "It's not about bragging rights. It's about financially delivering."

Carmakers to consolidate

This vision of a new Chrysler comes as the U.S. auto industry faces severe headwinds. A turbulent economy and rising gas prices are stifling vehicle demand and shifting consumer tastes to smaller and more fuel-efficient models.

Vehicles sales are down 7.7 percent through April and Nardelli doesn't expect a turnaround later in the year. Still, he said Chrysler is making progress. The company finished 2007 with $1 billion more cash on hand than expected and is on track to restore profits and positive cash flow, though he did not provide a timetable.

Chrysler has "a long way to go" but is on the road to profitability, Nardelli said.

Getting there will require being smaller.

Consolidation means that eventually there will be five or six global car companies that will sell more than 10 million units combined annually, but Chrysler won't be among them, Press said.

In that world, "we can play beautifully," he said. "Not being the biggest, but really fulfilling the needs of people where there is a visceral or emotional" connection to the vehicle.

"We're going to be a great little car company."

Chrysler will look to partner with the giants, as it has with Nissan Motor Co. and Volkswagen AG, to use Chrysler factory space to build vehicles for them.

In turn, larger companies will build vehicles for the Auburn Hills automaker, but Press promised those cars will be injected with "Chrysler DNA."

The automaker is focused on quality and intends to build vehicles that will earn buyers' loyalty. After launching five models this year, Chrysler will slow its product introductions and focus on making existing and future vehicles better -- no longer relying mainly on new models to prop up sales.

It will sell more parts

Chrysler will continue to look for partners on products and parts. The automaker is seeking a potential joint venture partner for its new axle plant, being built in Marysville, near Port Huron, so it can maximize production efficiency there by building axles for itself and others.

Other automakers "may be less inclined to buy from a direct competitor, but more inclined to buy from a joint venture," Nardelli said.

Chrysler is also selling transmissions and engines built in North America to manufacturers in China and Russia as a way to take advantage of excess capacity.

LaSorda said the automaker continues to seek out other alliances -- particularly to gain technology in the area of electric vehicles and other fuel-saving technologies.

"Why would we spend hundreds and hundreds of millions on (research and development), when we could buy it?" he asked.

The three executives said Chrysler's owner, Cerberus Capital Management LP, empowers them to make day-to-day decisions, including product-level alliances. Cerberus executives, however, lay out the company's long-term strategy and would negotiate any wider alliance, such as a speculated union with Nissan.

At this point, LaSorda said there have been no further talks about partnerships with Nissan. The two automakers recently reached a deal that calls for Nissan to build small cars for Chrysler and for Chrysler to build pickups for Nissan based on the Dodge Ram.

Chrysler seems to be facing down reality and smartly paring down its business and looking for alliances, said David Cole, chairman of the Center for Automotive Research in Ann Arbor.

"Compared to competitors, Chrysler lacks economies of scale," he said. "By doing these partnerships, particularly with a component like an axle, which a customer wouldn't see, it gives them a better shot at achieving that scale."

Private firm has advantages

Private ownership allows Chrysler to move quickly on partnerships and with its reorganization plan, Nardelli said.

Forecasting a significant drop in 2008 sales late last year allowed the automaker to cut shifts at five plants to better match production with sales. Nardelli said a public company might not have been able to take such bold action, fearing shareholder backlash. "Because we're a private company we can say what we want," he said. "The bad news is, we were right."

Chrysler's restructuring, which began last year before Daimler AG sold Chrysler after nine tumultuous years, is on target to reduce head count. LaSorda said the automaker will shed 10,000 workers from its payroll this year, matching the number of jobs cut last year.

In November, as part of that plan, Chrysler said it would eliminate 8,500 to 10,000 hourly workers. LaSorda said early retirement and buyout packages have achieved 78 percent of that goal already this year.

The executives reiterated their support of federal fuel economy standards, saying Chrysler is producing environmentally friendly vehicles that reduce American dependence on foreign oil. The company will roll out its first hybrids later this year and offer diesel and hybrid versions of its next generation Dodge Ram pickup.

Nardelli, however, railed against state-specific regulations. He also suggested the next president could use environmental tax incentives to encourage consumers to buy greener vehicles and bolster the nation's economy by only offering the incentives on domestic cars and trucks.

Leamington, Ontario – Plastech, a U.S.-based auto parts manufacturer, has announced that it will close its 18-year-old facility in Leamington, Ontario. The closure will eliminate over 300 jobs.

The plant produced plastic fascias, rocker panels and other exterior parts for the Big Three automakers, including Chrysler’s facilities in Windsor and Brampton, Ontario. The plant will close on May 16, 2008.

The company, which filed for bankruptcy protection earlier this year, blamed rising energy costs, a drop in vehicle demand and financial disputes with the automakers as reasons for the closing.

"We are exactly on plan or better relative to our return to profitability," Chrysler CEO Bob Nardelli says of his company's turnaround.

Profit to take more time

BY TIM HIGGINS • FREE PRESS BUSINESS WRITER

Chrysler LLC's top executives said Thursday they're meeting their internal goals and counseled patience as they re-create the Auburn Hills automaker as a smaller company. They offered no expectation for earning a profit this year and expressed concerns about the economy into 2009.

"There seems to be an expectation or desire that the company will take some elixir or there's some new coat of paint that you can put on the building or something like that, that instantaneously tomorrow it's a different company," said Jim Press, Chrysler president and vice chairman.

"Lesser companies would have buckled," Chief Executive Officer Bob Nardelli said of the struggles Chrysler has faced in the past year.

During a meeting with Free Press reporters and editors, Press, Nardelli and Tom LaSorda, also a president and vice chairman, said that:

• 5,600 to 6,000 of the 10,000 hourly workers the company wants to shed this year were granted buyouts or retirement packages in the first quarter.

• The surprise tentative labor agreement between the Canadian Auto Workers and Ford Motor Co. reached this week appears to fall short of what Chrysler thinks is competitive. CAW President Buzz Hargrove has said the deal would serve as the pattern for new agreements with Chrysler and General Motors Corp.

• The streamlining of Chrysler's product lineup, which is driving dealer consolidation efforts, will not happen in one fell swoop. Think five to seven years.

• A summer holiday from the federal gas tax is unhealthy and inconsistent with new fuel-economy regulations.

Press preached patience, noting that the three leaders are working to stabilize the company and prepare it for growth.

"These are global structural issues where we're competing with companies in other countries, in other worlds, in other environments," Press said. "We can and will be as good or better than they are, but it takes time to develop these products. It takes time to develop the manufacturing. It takes time for the technology. It takes time to shape the dealership organization."

An eventful year

Nearly a year ago, private-equity firm Cerberus Capital Management was ushered in as troubled Chrysler's savior. It gave assurances that the change would provide the automaker's future with strength and stability.

Since August, when the deal was closed, Chrysler has undergone sweeping changes with the addition of new leadership, including Nardelli and Press. The company made more job cuts, as many as 12,000 on top of 13,000 already planned; eliminated four products, and added a new partner. Nissan Motor Co. will build small cars for Chrysler to sell in North America, and Chrysler will make pickups for Nissan.

"As long as you have money, it's OK" to have patience, said David Cole, chairman of the Center for Automotive Research in Ann Arbor. "They're doing essentially what I think they have to do, is to try to leverage their assets and be more sharply focused than typically some people have to be in this industry. But they really are faced with a different set of circumstances than some of the others."

Van Conway, a turnaround expert from the Birmingham-based consulting firm Conway MacKenzie & Dunleavy, agreed it will take Chrysler's new team a while to turn around the business.

"It's a huge company, and if you want to turn around a huge company given what they're facing, it's not going to happen in a quarter or two," he said. "I don't think you can go in there and say, 'Let's fix it.' "

By the financial, sales numbers

Daimler AG, which kept a 19.9% stake in Chrysler, announced Tuesday that the value of its share in Chrysler had dropped nearly two-thirds since the August deal.

Also, Daimler's financial filings with the U.S. Securities and Exchange Commission seem to indicate that Chrysler lost $6.8 billion, primarily in the final five months of 2007, under European accounting standards used by Daimler.

Chrysler argues that using European rather than U.S. accounting standards to gauge how it is doing paints a distorted view of its business. Experts say it provides a relevant look into Chrysler's finances.

Although Chrysler has provided little guidance on its finances, a view more in line with its accounting practices might be to include the $1.6 billion Nardelli has said Chrysler lost in its operations last year plus the $1.3 billion the February turnaround plan was believed to cost.

Chrysler's sales this year are down 18% compared with last year at this time.

Major parts of Chrysler's turnaround plan involve cutting back on workers and streamlining the number of vehicles it makes.

As many as 6,000 UAW members were granted buyout or retirement packages to leave the company in the first three months of this year, LaSorda said. He estimated that those people should be finished departing in the next month or so.

Chrysler is attempting to cut its hourly workforce by as many as 10,000 this year. "We have never missed a reduction plan target, so I would not expect that we would miss this one, either," LaSorda said.

In March, UAW Vice President General Holiefield said he didn't think Chrysler would get 10,000 takers because of the troubled economy.

Lineup reduction to take 5-7 years

Press gave greater insight into how Chrysler's planned vehicle lineup reduction will play out. "You'll see some of it in five years and seven years. ... It's evolving as the new products come out," he said.

Press has told Bloomberg that Chrysler could cut its lineup of 11 SUVs in half and has indicated changes to the automaker's two minivans.

"We don't have -- don't need to have -- the resources allocated to produce two or three vehicles that really cater to the same customer base," Press said Thursday.

"We're one company. So we can expand our footprint, our coverage of our products by adding product in the B-segment and ... over time as we go through the model change cycles, we'll be morphing some products out and bringing some products in, and in general we'll have fewer products in the portfolio.

"By doing that, the three brands will have more distinctiveness and they won't be competing with each other."

Last month, Chrysler and Nissan announced a partnership to share some specific vehicle platforms, allowing Chrysler to sell a Nissan-made small car -- the so-called B-segment -- in North America and elsewhere without the expense of coming up with its own platform.

In return, Chrysler will make Nissan a pickup based on the Dodge Ram for the Japanese company to sell in the United States.

"We're excited about that. We're very excited about the continuation of discussions with Nissan," Nardelli said. "I hope ... the industry would see that as a tremendous vote of confidence in Chrysler. ... It speaks volumes, I think, about their confidence in our ability to produce that vehicle and the longevity of Chrysler."

A bounce in their step

On Wednesday, Chrysler's top 300 executives met to talk about how the company is doing, Nardelli said.

"They went out with a bounce in their step. We shared with them where we are and where we want to go," Nardelli said. "I would hope you see that as a solid message again for Chrysler, for Detroit, for the auto industry, for America."

Nardelli again noted that Chrysler has met or exceeded every metric provided to investors in August, including ending 2007 with $1 billion more cash on hand than expected.

As the first privately held major U.S. automaker in more than 50 years, Chrysler is not required to provide details about its finances. What little is known comes from Daimler's reporting and occasional statement -- or misstatement -- from Chrysler executives.

"There is a lot of discussion about the health of Chrysler LLC and the ability to sustain operations, etc. We're not where we want to be over the long haul. But we are exactly on plan or better relative to our return to profitability," Nardelli said.

5.2.1895Eugene Holman of the Standard Oil Company of New Jersey is born in San Angelo, TX5.2.1925The Rolls-Royce New Phantom, later called the Phantom I, is introduced5.2.1937C. N. Teetor, founder of the Teetor-Hartley Motor Company who designed the first enbloc 4-cylinder engine in 1909 and later founded the Perfect Circle Company, manufacturers of piston rings, dies in Hagerstown, IN at age 665.2.1948Wilhelm von Opel dies in Wiesbaden, Germany at age 765.2.1956Racer Robb Gravett is born in London, England

At a briefing for the 2009 Ram, a Chrysler spokesman confirmed that a diesel will be offered in the half-ton next year, probably as a 2010 model, but declined to say which diesel it will be.

Either Cummins' modular V-6 or V-8 would fit, but if there can be only one, we hope it'll be the 4.2-liter V-6. It has superior economy with Hemi-like torque and it'll be more competitive with Ford and GM, which are both readying light-duty diesels in the 4.5-liter range.

2002 DODGE VIPER *TWIN TURBO CHARGED. Less than 1,000 miles since completion. Hennessey wing and front spoiler. Never tracked or abused. RSI upgrades include motor with a built Stroker kit, Inconel valves, springs/retainers, full port and polish. When boost set at 25-26 psi this car will produce 1,470+rwhp. 1,000 rwhp on pump fuel.